Concessional GST Rate Can’t Be Denied for Wrong ITC | HC

Case Details: GU Shipping India (P.) Ltd. vs. Assistant Commissioner of CGST and Central Excise [2026] 185 taxmann.com 162 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• Joseph Prabakar for the Petitioner.
• Mrs Revathi Manivannan, Sr. Standing Counsel for the Respondent.

Facts of the Case

The petitioner was engaged in providing freight and leasing/renting services of vessels with crew members. It initially discharged GST at 18% and later, after amendment and classification as ‘time charter of vessels for transport of goods’, began paying tax at 5% under the concessional entry of the relevant notification. The Department issued a show cause notice (SCN), culminating in an adjudication order confirming tax at 18% along with interest under Section 50 of the CGST Act and 100% penalty on the ground of ineligibility to the concessional benefit. It was contended that the dispute was confined to reversal of wrongly availed ITC with interest and penalty and not denial of concessional rate. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the denial of concessional rate solely on account of alleged wrongful availment of ITC was not sustainable in law. It was observed that the appropriate course, where ITC was wrongly availed, was to direct reversal of such credit along with interest and penalty under Section 74 of the CGST Act rather than imposing a higher tax liability of 18%. The Court further held that authorities could not increase tax liability merely because of inadvertent or technical errors in ITC availment, when statutory mechanisms for correction were available. It was concluded that denial of substantive benefit was unjustified in such circumstances. Accordingly, the impugned order was set aside and the matter was remitted to the jurisdictional officer under CGST for determination of the actual ITC wrongly availed and consequential computation of interest and penalty.

List of Cases Reviewed

• Chandrapur Magnet Wires (P.) Ltd. v. CCE 1996 taxmann.com 736 (SC)
• Unichem Laboratories Ltd. v. CCE 2002 taxmann.com 494/2002 (145) E.L.T. 502 (SC) (Para 39), followed

List of Cases Referred to

• Chandrapur Magnet Wires (P.) Ltd. v. CCE 1996 taxmann.com 736 (SC) (para 8)
• Hello Minerals Water (P.) Ltd. v. Union of India 2004 (174) E.L.T. 422 (All.) (para 9)
• Franco Italian Co. (P.) Ltd. v. CCE 2000 taxmann.com 360 (CEGAT- New Delhi) (para 9)
• Pepsico India Holdings (P.) Ltd. v. CCE [Excise Tax Appeal No. E/41318 of 2015-DB, dated 10-12-2019] (para 10)
• Unichem Laboratories Ltd. v. CCE 2002 taxmann.com 494/2002 (145) E.L.T. 502 (SC) (para 31).